Market Snapshot: S&P 500 holds on to gains after hitting all-time high, Dow rises as Treasury yields climb

What are major benchmarks doing?

• The Dow Jones Industrial Average
  DJIA,
  +0.38%
  gained 92 points, or 0.3%, to 33,913.

• The S&P 500 SPX was up 9 points, or 0.2%, to trade at roughly 4,193, after trading at an intraday record of 4,218.78.

• The Nasdaq Composite
  COMP,
  -0.06%
  was off 43 points, or 0.3%, to 14,008, near the session low, after hitting an all-time high at 14,211.57.

On Wednesday, stocks ended with small losses following the Fed meeting, after the S&P 500 notched an intraday record. The Dow fell 164. 55 points, or 0.5%, while the S&P 500 ended 0.1% lower and the Nasdaq Composite lost 0.3%.

What’s driving the market?

Corporate earnings remain strong, with Apple Inc.
AAPL,
+0.18%
and Facebook Inc.
FB,
+6.58%
delivering much stronger-than-expected results late Wednesday, offering a test to stocks that have failed to break out of a sideways trading range despite a robust earnings season.

Ratings Game: Why Apple’s ‘blowout’ earnings aren’t lifting its stock

The pullback from initial gains by tech heavyweights and the indexes is in keeping with the pattern seen over the course of earnings season, said Art Hogan, chief market strategist at National Securities, in a phone interview.

Stocks of companies that beat estimates haven’t seen outsize gains, while shares of companies that disappoint have seen outsize punishment, he noted, adding that such a pattern isn’t a surprise against a backdrop in which stocks are trading near all-time highs.

Meanwhile, investors have largely ignored a consistent run of positive economic news, but will be likely to return their attention to prospects for an acceleration in growth this summer that is lifting expectations for future earnings growth, he said.

Thursday is the busiest day of the quarterly earnings reporting season, with roughly 11% of the S&P 500 index due to publish updates. Caterpillar, McDonald’s, Comcast and Merck reported before the market opened. Amazon and Twitter will post results after the market closes.

Currently about 86% of the S&P 500 companies that have reported beaten estimates, with earnings coming in 22.7% above expectations, according to data from Refinitiv. For revenue, 77% of companies have exceeded expectations.

Some analysts warned that a renewed rise in Treasury yields could spell trouble for stocks, particularly in the tech sector. Rising yields can be a headwind, particularly for growth oriented stocks, because they reduce the discounted value of future earnings. A rise in yields in March was credited with adding fuel to a rotation away from tech stocks and other highfliers into more cyclical stocks poised to benefit from the reopening of the economy. Yields have since pulled back, after rising to 14-month highs around 1.78%.

“This week’s steady but notable rise in Treasury yields could be weighing on U.S. equities and if Apple’s earnings beat is unable to set Wall Street alight, it doesn’t bode well for the rest of the earnings season,” said Raffi Boyadjian, senior investment analyst at XM, in a note.

Treasury yields slipped Wednesday afternoon after the Federal Reserve and Powell struck a dovish tone, but were rising again Thursday. The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
rose 4.4 basis points to 1.667%.

Hogan said rising yields may be affecting stocks at the margins Thursday, but doubted they would spark a significant, renewed rotation from tech and other growth stocks into cyclicals unless the 10-year made a new cycle high.

Stocks edged higher during Powell’s news conference, with the S&P 500 hitting an all-time high, but ended the day slightly lower.

Read: Fed’s Powell ‘doesn’t blink,’ and 5 other things we learned from his press conference

Late Wednesday Biden, in an address to a joint session of Congress, called for bigger government investment in the economy, including a $1.8 trillion proposal for additional spending on child care, education and paid leave partly offset by higher taxes on wealthy Americans.

Capitol Report: The word ‘jobs’ appeared more than 40 times in Biden’s first speech to Congress

In U.S. economic data, first-time jobless benefit claims fell to 553,000 last week from a revised 566,000 a week earlier, the Labor Department said Thursday. With revisions, the reading was the lowest level of claims since the pandemic struck last year.

Gross domestic product, the official scorecard for the U.S. economy, rose at a 6.4% annual pace in the first quarter, the government said Thursday.

 The data show that “the seeds of a virtuous cycle have clearly sprouted, but still have plenty of room for growth in the coming quarters,” said Jim Baird, chief investment officer for Plante Moran Financial Advisors.

“Consumers are flush with cash and COVID fatigue has put them in the mood to spend. We expect that they will,” he said.

Pending U.S. home sales rose 1.9% in March, less than expected, according to the National Association of Realtors, as prices surged and 30-year fixed rate mortgages edged higher from pandemic lows.

Which companies are in focus?

• Shares of Apple were flat despite the iPhone maker posting better-than-expected revenue across all of its product categories for the March quarter, boosted its buyback program by $90 billion and raised its dividend by 7%.

• Facebook shares rose 5.4% after the social-media giant reported better-than-expected earnings.

• Ford Motor Co.
  F,
  -8.57%
  late Wednesday said it had one of its best quarters on record as it swung to a profit and consumers welcomed new vehicles, but also warned that a global chip shortage could lead to a $2.5 billion hit to the auto maker’s bottom line this year. Shares were down more than 9%.

• Shares of Ebay Inc.
  EBAY,
  -10.53%
  were down nearly 11% after the online auction site reported better-than-expected first-quarter earnings, aided by growth in core categories, namely sneakers and watches.

• Share of Qualcomm Inc.
  QCOM,
  +3.69%
  were up 3.6% after the chip maker delivered results and an outlook late Wednesday that topped Wall Street estimates following recent downgrades to the stock.

• Caterpillar Inc.
  CAT,
  -3.30%
  shares fell 2.4% after the construction-equipment maker delivered results that blew past estimates.

• Merck & Co. Inc.
  MRK,
  -5.17%
  shares fell 5.1% after the drug giant reported first-quarter profit and revenue that missed expectations, as the COVID-19 pandemic and loss of market exclusivity weighed on pharmaceutical sales.

• The Wall Street Journal reported that Verizon Communications Inc.
  VZ,
  +1.46%
  is exploring a sale of assets including Yahoo and AOL. Verizon shares rose 1.4%.

• McDonald’s Corp. 
  MCD,
  +1.08%
  reported first-quarter net income of $1.54 billion, or $2.05 per share, up from $1.01 billion, or $1.47 per share, last year. Shares rose 0.5%.

• Shares of cruise-line operators traded mixed Thursday, after the Centers for Disease Control and Prevention said cruise ships might be able to resume sailings as early as mid-July. Shares of Carnival Corp.
  CCL,
  -1.23%
  rose 0.4%, while Royal Caribbean Group
  RCL,
  -3.08%
  shares fell 1.6% and Norwegian Cruise Line Holdings Ltd.
  NCLH,
  +0.33%
  advanced 1.6%.

• Shares of Uber Technologies Inc.
  UBER,
  -5.60%
  and Lyft Inc.
  LYFT,
  -10.11%
  took a hit after U.S. Labor Secretary Marty Walsh said gig workers should be classified as employees.

What are other markets doing?

• The ICE U.S. Dollar Index
  DXY,
  +0.07%,
  a measure of the currency against a basket of six major rivals, was up 0.1%.

• Oil futures rose for a third straight session, with the U.S. benchmark
  CL00,
  +1.55%
  up 1.4% at $64.75 a barrel on the New York Mercantile Exchange. Gold traded lower, with the June contract
  GC00,
  -0.37%
  down 0.3% at $1,768.30 an ounce on Comex.

• The Stoxx Europe 600 index
  SXXP,
  -0.26%
  edged 0.3% lower, while London’s FTSE 100
  UKX,
  -0.03%
  ended flat. The Shanghai Composite
  SHCOMP,
  +0.52%
  rose 0.5%, while Hong Kong’s Hang Seng Index
  HSI,
  +0.80%
  advanced 0.8%.